American Family acquiring Ameriprise Auto & Home for about $1 billion

American Family plans to acquire Ameriprise Auto & Home for about $1 billion.(Photo: American Family Insurance)

The Madison parent company of American Family Insurance said Tuesday it is buying Ameriprise Auto & Home, a De Pere-based property-and-casualty insurer, for about $1 billion.

American Family Insurance Mutual Holding Co. said the acquisition adds customers, diversifies risk and gets the company deeper into the California market.

Ameriprise Auto & Home is a business unit of Ameriprise Financial. It offers products mainly through a partnership with wholesale retailer Costo and via referrals from Ameriprise Financial advisers.

The insurer sells auto, homeowners, renters, umbrella and some specialty insurance lines policies in 43 states and the District of Columbia. In 2018 it had $1.8 billion in assets and $1.1 billion of annual direct premium written. About 70 percent of its premium is from auto insurance sales. Ameriprise Auto & Home employs 1,800 people.

American Family, which is the No. 1 insurer of homes and autos in Wisconsin, reported 2018 results of $27.5 billion in assets and $9.6 billion of direct premium written. The group employs 12,000 people through its various companies, with American Family-brand products sold through 2,500 independent contractor exclusive agents.

Ameriprise Auto & Home will become a subsidiary within the American Family Insurance group and operate under its existing name until a new name is identified and approved by regulators. American Family said it plans to retain all Ameriprise Home & Auto employees.

The companies put the sale price at $1.05 billion, subject to post-closing adjustments.

The acquisition, which is expected to close in the second half of 2019, will be the fifth by American Family since 2012.

American Family said the Ameriprise deal fits its strategy of complementing its exclusive agents with distribution channels for customers who prefer to handle their insurance matters in different ways. The acquisition also broadens American Family’s business geographically, which spreads out storm risk and helps further strengthen the company’s financial position, American Family said.

“This is about serving more customers through channels they prefer, and strengthening our ability to protect them,” Jack Salzwedel, American Family chairman and chief executive officer, said in a statement Tuesday. “American Family exclusive agents continue to have great success. Our direct-channel companies are growing. And last year, we merged with a company that offers products through independent agents.”

Salzwedel said that with the new acquisition, American Family expands its efforts to reach customers who prefer to acquire insurance through relationships they have with other entities.

"By doing this and continuing to grow in our other channels, we build scale, capabilities and financial strength to provide greater value to our customers,” Salzwedel said.

Current Ameriprise Auto & Home customers will retain their policies with no change in coverage or service, American Family said.

Ameriprise Auto & Home makes "a significant majority of its sales" through a partnership with Costco, which offers Ameriprise Auto & Home policies to members through its website. American Family and Costco have entered into a letter of intent to continue that partnership. Ameriprise also sells its products through referrals from Ameriprise Financial advisers. That relationship will continue after the acquisition, American Family said.

American Family said the acquisition diversifies its storm loss risk by reducing the group’s premium concentration in hail- and tornado-prone states. While a previous merger with Main Street America diversified catastrophe risk with its customer concentration on the East Coast, the majority of Ameriprise Auto & Home's business is in Western states, with most of its premium generated in California from auto insurance.

American Family said the deal provides access to a very large customer base in a state where American Family group does relatively little business.

“We are pleased to reach this agreement and feel confident that we will be leaving the business in good stead given American Family Insurance’s financial strength and reputation for quality products and customer care," said Jim Cracchiolo, chairman and CEO of Ameriprise Financial.

Paul Gores can be reached at (414) 224-2392. Follow him on Twitter @pgores